The Berkeley Rent Board Mailbag

Annual General Adjustments
(and other types of rent increases)

Q: My tenants moved in in June of 2003 and I want them to renew their lease for another year. If I have them sign a new lease for the same rent as the old one, do I have to wait until next June to take the 2005 Annual General Adjustment or will I be able to take it in January when it goes into effect?  (June 2004)

You can draft your lease to allow rent increases authorized by the Rent Stabilization Board during the lease term. Otherwise, you would not be able to increase the rent during the lease period.

Q: I have a tenant whose water consumption has more than quadrupled. I, of course, am paying for the water, but I'd like to pass on the increases to the tenant. Is that possible?  (June 2004)

Our advice would be to discuss the matter with the tenant, if you haven't already done so, to find out whether there is a leak and, if not, why his/her usage has increased. If there is no leak and you cannot reach an understanding with the tenant, you could petition the Rent Board to transfer responsibility for the water bill to the tenant with a corresponding rent ceiling decrease. In the alternative, you could petition for a rent ceiling increase; you would have to prove that the tenant is using more water than is reasonable for the number of occupants in the rental unit, and take the position that this constitutes an increase in services.

Q: I have a tenant who is paying very little in rent: $420 for a 1-bedroom apartment is the ceiling! Is there any way to raise her rent?  (October 2003)

A low rent such as this will usually qualify for an increase through a petition for Historically Low Rent. Because each situation is different, and the formula for computing increases can be a bit complex, we'd advise you to contact a Rent Board housing counselor for details. But, not knowing any other details and assuming the following are true, you could expect a rent ceiling increase of about $80: (a) the tenancy started before 1/1/99; (b) the unit has no serious code or habitability violations.

Q: How can the 2003 Annual General Adjustment be $0? I'm pretty sure my operating expenses have increased this past year. What is the basis for this determination?  (November 2002)

The Rent Ordinance requires the Rent Board to annually establish a formula for determining the Annual General Adjustment (AGA). The AGA is partially based on an analysis of increases and decreases in 27 operating expenses for the last year ending June 30. Among the expenses measured are: water and sewer, gas, electricity, property taxes and assessments, insurance, garbage, business license fees, and Rent Board registration fees.

The analysis is prepared by an outside consulting firm. This year's study found that, for the period July 1, 2001, through June 30, 2002, most expenses increased very little, while the cost of natural gas substantially decreased. In sum, total expenses for individually-metered buildings increased by 0.7%, and for master-metered buildings decreased by 2.67%. Besides operating expenses, AGAs must account for any adverse effects of inflation since 1980, and the study determined that no adjustment for that purpose is needed this year. Given the very small change in operating expenses, the Board voted to adopt no annual increase. To view the study, visit the Rent Board website or call to request a copy from the Board.

If your operating expenses have increased significantly, you may want to consider filing a petition with the Rent Board for an adjustment of rent ceilings to maintain your net operating income. If your current net operating income is less than your base year (1980) net operating income adjusted for inflation, you may be entitled to rent ceiling increases to cover increased costs.

Q: I moved into my apartment in June of 2000 and have always paid $1000/month rent. I just got a notice from my landlord saying my rent will increase to $1039 in January. I thought there was a $30 cap on rent increases for 2002- am I wrong? (November 2001)

Yes and no. For tenancies beginning before January 1, 2001, the 2002 Annual General Adjustment (AGA) allows a landlord to raise the rent by 3.5%, not to exceed $30, plus an additional $9 if the landlord pays for the heat in the unit. The $9 increase for heat is in addition to the percentage increase the landlord is allowed. So, if your landlord pays for the heat in your unit, he or she is entitled to a $39 rent increase. If you pay for heat, explain to the landlord that the AGA increase should be only $30.

Q: My tenant moved in and first paid rent in March 2001. Is it true that I won't be able to increase the rent by the 2002 AGA?

Yes. The 2002 Annual General Adjustment, as with all AGA's, is calculated to reflect changes in operating expenses a landlord incurs during the previous year. In your situation, since this particular tenancy began in 2001, you were able to set a market rent for that tenancy, allowing you to estimate and account for your own actual changes in operating expenses for 2001. Since you are presumably recovering those expenses, implementing the 2002 AGA would constitute a double recovery. In January of 2003, you will be eligible for that year's AGA, which will cover changes in operating expenses in 2002.

Q: I've been living in my apartment for 4 years and the landlord has raised the rent only once during that time. Now he wants to raise it by $40. Can he do that?
A landlord can raise the rent to the lawful rent ceiling at any time, unless you have a lease that fixes the rental amount for the term of the lease. He must give you at least 30 days' written notice of the increase. If the increase is more than 10% of the rent, say, $40 on a rent of $375, he has to give you at least 60 days' notice (California Civil Code section 827(b)(3)).

Rent increases are no longer regulated for single-family homes (defined as one dwelling unit on a property) that have new tenancies beginning on or after January 1, 1996. In such cases, a landlord may increase the rent by an unlimited amount as often as he wishes, provided he is not bound by a lease, and as long as he gives the requisite 30 or 60 days' notice, depending on the amount of the increase.

Q: On September 28, I mailed my tenant a 30-Day Notice to increase the rent by 5% as of November 1. She says she didn't receive the notice until October 3 and that since she didn't get 30 days' notice, she doesn't have to pay the increase. Is this correct?

Not exactly. She does have to pay the increase, but she is entitled to 30 days' notice, so if she received it on October 3, the increase would go into effect 30 days from then: November 2.

According to state law, if a landlord uses first class mail to send a notice to increase rent, the 30 (or 60) day period is extended by 5 days (CA Civil Code, section 827(b) and Code of Civil Procedure section 1013). In addition, the date of mailing must be stated on the notice or included on a proof of service. So, if you want the rent increase to be effective the first of the month, and avoid any questions about when it goes into effect, be sure to mail the notice at least 35 days ahead of time, or personally deliver the notice 30 days in advance.

Q: I rent to tenants on a month-to-month lease. They pay rent on the first of each month. If I personally give them a notice to increase the rent (by 10% or less) in the middle of the month, can the increase go into effect in the middle of the next month, or do I have to wait until the beginning of the following month to get the increase?

You are entitled to the increase in 30 days. You may prorate the next month's rent, so the tenants pay the original amount for the first half of the month, and the increased amount for the second half, all due on the first of the next month. For example, if the rent is $1600, and you hand your tenants a 30-day Notice on October 15 to increase it to $1750, the increase is effective beginning November 14. On November 1, they should pay $1663, which is 13 days at the old rent ($1600/ 31 days/Oct. month = $51.6 per day, x 13 days = $671) plus 17 days at the new rent ($1750/ 30 days/Nov. month = $58.33 per day, x 17 days = $992). Or, to make things simpler, you might want to wait until the following month to get the full increase on the first of the month.

Q: I moved into my apartment in November of 1999 and paid $1200 in rent. My landlord raised my rent by $6 in 2000, by another $10 in 2001, and for 2002 she wants to raise it by $30 more. I checked my rent ceiling on the Rent Board website, and it shows that the ceiling for this unit is $958. Am I being overcharged?

The $1200 rent that your landlord initially charged was probably legal. Beginning January 1, 1999, full vacancy decontrol went into effect, meaning that landlords could set a new rent for a new tenancy, unless the prior tenant's vacancy was not voluntary - in other words, resulted from harassment, threats to move in or take the unit off the market, reducing housing services, or failing to perform necessary repairs. Absent evidence that the tenancy before yours was terminated involuntarily (other than for non-payment of rent), $1200 was a legal rent that became the new rent ceiling.

But if a landlord doesn't file a Vacancy Registration (VR) form reporting a new tenancy to the Rent Board, the new ceiling won't be reflected in the Board's records. This could explain why the Board's records still show a $958 rent ceiling for your unit. If your landlord failed to file a VR form for your tenancy, she is considered out of compliance with the Board's registration requirements and therefore ineligible for annual general adjustments (AGA's), keeping your rent ceiling at $1200. (She cannot take the 2000 AGA in any case, because a landlord is not entitled to an AGA increase the year after a new rent is set).

You should check with a Rent Board counselor to determine whether a VR form was filed for your tenancy. If it was not, in addition to the $6 monthly overcharges in 2000, you were overcharged $16 per month in 2001, for a total of $264. You should inform your landlord that she must file a VR form before she is eligible for AGA's, and ask if she will agree to either reimburse you $264 or allow you to deduct if from your next month's rent. If she refuses, you will have to file a petition with the Rent Board claiming the landlord has charged illegally high rent, to receive an official decision that you are entitled to a refund of rent overcharges.
Once your landlord files a VR form reporting your tenancy, she will be eligible for the 2001 and 2002 AGA's. The rent ceiling in 2002 after she is in compliance will be $1240: the initial rent of $1200, plus the $10 AGA for 2001, and the $30 AGA for 2002.

Q: I'm a landlord in Berkeley. Can I bank the Annual General Adjustments (AGAs) I'm granted each year, or do I risk losing the increases if I don't charge them immediately?

You can "bank" AGAs, by not raising the rent on January 1st even though you are authorized to do so, and then increase the rent at a later time. As long as the rental unit is in compliance, the rent ceiling will be automatically adjusted in the Board's database. You can raise the rent to the rent ceiling at any time provided you give the tenants a written, 30-day notice of a rent increase. However, if the amount of the increase is greater than 10% of the lowest rent during the previous 12 months, California Civil Code Section 827(b)(3) requires you to give your tenants a 60-day written notice.

Q: I manage an 18-unit building in Berkeley and it is time for me to notify the tenants about the Annual General Adjustment (AGA) rent increase. I understand that the AGA for this year is $10.00 plus another $8.00 if the landlord pays for gas. In my building, the tenants pay for the gas for their stoves, but the owner pays the bill for the gas boiler that heats the building. Am I entitled to charge all or part of the additional $8.00 that the Rent Board is allowing for gas service?

The Annual General Adjustment Order for 2001 (Rent Board Regulation 1123) allows owners to charge the supplemental $8.00 increase when they pay for all gas service and/or gas heat for a unit. Since you pay for the gas heat, you are entitled to the supplemental increase.

The $8.00 increase will be automatically added to a unit's rent ceiling if "gas" or "heat" is currently listed as a provided service in the Board's records for a unit. Landlords who pay for gas and/or gas heat for a unit who have not informed us of the services provided should notify the Rent Board in writing so that the information in the Board's database may be updated.

Q: I moved into my apartment in 1999.  Can my landlord increase my rent by the 2000 AGA in January?

No.  AGAs are intended to compensate landlords for increases in maintenance and operating costs and inflation that occurred during the prior year.  Since your rent was set at market rate in 1999, the presumption is that your landlord took these cost increases into account in determining the amount of rent to charge for your unit.  Board Regulation 1122 (the Annual General Adjustment Order for 2000) therefore prohibits a landlord from taking the 2000 AGA on tenancies that commenced in 1999.  Otherwise, the landlord would be twice compensated for the same inflation increases and operating costs.

 Q: In June, my landlord raised my rent to the allowable level for 1999. Can she raise it again in January 2000 if another rent increase is authorized by the Rent Board, even though she would have raised it only six months earlier? In other words, can a landlord raise the rent twice in one fiscal year?

Unless you have a lease that sets the rent level for a specific time period, the rent may be raised to the maximum allowable amount at any time upon expiration of a 30 day written notice. There is no provision in the Rent Ordinance that limits the number of increases a landlord can impose within a 12-month period.

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